In a second important case interpreting §101 in the last two weeks, the Federal Circuit on Friday looked at the issue of what constitutes an attempt to patent a natural phenomenon. In Prometheus Laboratories, Inc. v. Mayo Collaborative Services, the Federal Circuit determined that a method for optimizing the dosage of a medication was appropriate subject matter within the meaning of § 101.

The broadest claim recites basically a single step: (1) determining the level of a specific factor (6-TG) in a patient that is receiving a particular medication, wherein if the determined level is less than a first level that indicates a need to increase the dosage of the medication and wherein if the level is greater than a second level that indicates a need to decrease the dosage of the medication.

This case was previously before the Federal Circuit, and the court upheld the validity of the claims. After the defendant petitioned for certiorari to the Supreme Court, the Supreme Court issued its Bilski decision and ordered the Federal Circuit to reconsider Prometheus in light of Bilski.

Unlike the Microsoft case decided last week, the Federal Circuit started its analysis in Prometheus by applying the machine-or-transformation test. The court found that the determining step necessarily involves a transformation. In order to determine the level of the 6-TG in a patient’s blood it is necessary to take a sample of a bodily fluid or tissue and perform a test on that sample that transforms the sample. The court relied on testimony from an expert that at the end of the test the “human blood sample is no longer human blood; human tissue is no longer human tissue.”

Defendant Mayo argued that even if the tests on the samples are transformative, they are merely insubstantial data gathering, which has generally been held as insufficient to bring an otherwise unpatentable claim within the purview of § 101. In particular, Mayo relied on the case In re Grams, 888 F.2d 835 (Fed. Cir. 1989). In Grams the claims recited a two-step process of performing a clinical test on an individual and based on the data from that test determining if an abnormality exists. In Grams the Federal Circuit determined that the invention was not patentable because it was merely an algorithm combined with data gathering.

The court distinguished Prometheus from Grams because the determining step in Prometheus is not “merely” data gathering, but is an important part of a treatment regime. In Grams there was no limit on what the clinical test could be, but in Prometheus it was limited to a test for a specific factor in blood.

The court noted that the “wherein” clauses in the claims were mental steps that were not themselves patent eligible. However, because they were tied to patent-eligible subject matter, their presence in the claims did not disqualify the claims.

One important question that appears to have been left open is whether satisfying the machine-or-transformation test is sufficient to establish that an invention falls within the eligible subject matter of § 101. The court recognized that Mayo made the argument that while it is not necessary for an invention to satisfy the machine-or-transformation test it is sufficient. However, in presenting its analysis, it only said: “as applied to the present claims, the ‘useful and important clue, an investigative tool,’ leads to a clear and compelling conclusion, viz., that the present claims pass muster under § 101.” It did not say whether there were circumstances where an invention could satisfy the machine-or-transformation test and still fall outside § 101.

There are a couple important take-aways from this case for financial patents. One, the machine-or-transformation test continues to play an important role in determining whether purported inventions are directed to patent-eligible subject matter. New applications should be drafted with this in mind. Existing patents satisfy the test will almost certainly satisfy § 101.

Two, the “transformation” prong of the test now appears to have importance. The court read the claims in a favorable way to find transformation. The “determining” step did not specify any particular physical test, or even that a physical test was necessary. Nevertheless, the court reasoned that a physically transforming test was necessary to make the determination . This raises the question my mind of whether transforming data with a computer, which necessarily involves a physical change to a storage medium, also satisfies the machine-or-transformation test.

The big issues still waiting for Federal Circuit guidance from a financial patents perspective are: (1) When does performing steps with a computer tie a method to a particular machine? and (2) Is transforming data with a computer a transformation within the meaning of the machine-or-transformation test?